FEDERAL COURT OF AUSTRALIA Perilya Limited, in the matter of Perilya Limited [2013] FCA 1159 Citation: Perilya Limited, in the matter of Perilya Limited [2013] FCA 1159 Parties: PERILYA LIMITED (ACN 009 193 695) File number(s): WAD 396 of 2013 Judge(s): SIOPIS J Date of judgment: 28 October 2013 Catchwords: CORPORATIONS – scheme of arrangement – application for the convening of a meeting under s 411 of the Corporations Act 2001 (Cth). Legislation: Corporations Act 2001 (Cth) s 411 Cases cited: In Re Hills Motorway [2002] 43 ACSR 101 Date of hearing: 28 October 2013 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 17 Counsel for the Plaintiff: Mr I Armeli Solicitor for the Plaintiff: Allion Legal IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 396 of 2013 IN THE MATTER OF PERILYA LIMITED (Acn 009 193 695) PERILYA LIMITED (ACN 009 193 695) Plaintiff JUDGE: SIOPIS J DATE OF ORDER: 28 OCTOBER 2013 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (Act): (a) the plaintiff, Perilya Limited ACN 009 193 695 (Perilya), convene a meeting (Scheme Meeting) of the holders of ordinary shares in Perilya (Perilya Shareholders), for the purpose of considering and, if thought fit, approving a scheme of arrangement proposed to be made between Perilya and Perilya Shareholders (with or without modification) (Scheme), being the scheme substantially in the form set out in Annexure C of the scheme booklet, containing the explanatory statement, in relation to the Scheme which is Annexure "MJ7" to the affidavit of Michael Wylie Jools sworn 24 October 2013 (Scheme Booklet); (b) the Scheme Meeting be held at 10:30am (WST) on 2 December 2013, at Conference Suite, Level 8, Exchange Plaza, 2 The Esplanade, Perth, Western Australia; (c) Patrick O'Connor or, failing him, Anna Maria Liscia act as chairperson of the Scheme Meeting and report the result of the Scheme Meeting to this Court; and (d) the chairperson appointed to the Scheme Meeting have the power to adjourn the Scheme Meeting in their absolute discretion for such time that the chairperson considers appropriate. 2. Pursuant to section 1319 of the Act, Rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) shall not apply to the Scheme Meeting, except in so far as that rule applies regulation 5.6.13 of the Corporations Regulations 2001 (Cth) to the Scheme Meeting. Subject to these Orders (which shall prevail in the event of any inconsistency) and pursuant to section 1319 of the Act, the Scheme Meeting is to be: (a) convened, held and conducted in accordance with the provisions of Part 2G.2 of the Act that apply to members of a company and the provisions of Perilya's constitution that are not inconsistent therewith and that apply to meetings of members; and (b) convened using the notice of meeting in the form or to the effect of the notice contained in Annexure E of the Scheme Booklet. 3. The Explanatory Statement in the Scheme Booklet be approved for distribution to Perilya Shareholders. 4. Subject to registration of the Scheme Booklet with the Australian Securities and Investments Commission (ASIC) pursuant to section 412(6) of the Act, Perilya is to dispatch, on or before 31 October 2013, a document substantially in the form of the Scheme Booklet, a proxy form, a share election form and a reply-paid envelope addressed to Computershare Investor Services Pty Limited to each Perilya Shareholder on Perilya's register of members (Register) as at 7:00pm (WST), 28 October 2013, to the relevant address set out in the Register by: (a) in the case of each Perilya Shareholder who has a registered address in Australia, prepaid post; (b) in the case of each Perilya Shareholder who has a registered address outside of Australia, prepaid airmail or air courier; and (c) in the case of each Perilya Shareholder who has nominated an electronic address for the purposes of receiving notification of notices of any meeting from Perilya, by email. 5. Dispatch of the documents referred to in paragraph 4 of these Orders in accordance with its terms is to be taken to be sufficient notice of the Scheme Meeting. 6. The time by which Perilya Shareholders must return their proxy forms for the Scheme Meeting is 10:30am (WST) on 30 November 2013. 7. All voting at the Scheme Meeting be by poll to be declared by the chairperson. 8. At the Scheme Meeting, a Perilya Shareholder will be entitled to one vote for each fully paid ordinary share in Perilya that the person is registered as holding at 4:00pm (WST) on 1 December 2013. 9. Perilya publish once an advertisement in each of The Australian and The West Australian newspapers, substantially in the form of Annexure "A" to the minute of proposed orders placed on the Court file, with such advertisement to be published on or before 2 December 2013. 10. Perilya shall otherwise be exempted from compliance with rule 3.4 of the Federal Court (Corporations) Rules 2000. 11. The proceedings be stood over to 9 December 2013 at 2:15pm before the Honourable Justice Siopis for the hearing of any application to approve the Scheme. 12. There be liberty to apply upon the giving of 48 hours' notice to ASIC. 13. These orders be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 396 of 2013 IN THE MATTER OF PERILYA LIMITED (Acn 009 193 695) PERILYA LIMITED (ACN 009 193 695) Plaintiff JUDGE: SIOPIS J DATE: 28 OCTOBER 2013 PLACE: PERTH REASONS FOR JUDGMENT 1 This is an application under s 411 of the Corporations Act 2001 (Cth) for the making of orders for the convening of a meeting of members of the company, Perilya Limited (Perilya), to consider and, if thought fit, approve the entry into a scheme of arrangement which is proposed between Perilya and its members. Perilya is a company which is listed on the Australian Securities Exchange. 2 The majority shareholder of Perilya is Zhongjin Lingnan Mining (HK) Company Limited (Zhongjin), a company whose shares are listed on the Shenzhen Stock Exchange. Zhongjin holds 53.37% of the Perilya shares which are on issue. The scheme of arrangement proposes that a subsidiary of Zhongjin will acquire the remaining 46.63% of the shares on issue from the Perilya shareholders for a scheme consideration of 35 cents per share. The consequence of the implementation of the scheme would be that Perilya would become a subsidiary of Zhongjin and would cease to be listed on the Australian Securities Exchange. 3 There are also 5,193,014 unlisted options which have been issued by Perilya. However, the evidence is that those options are "out of the money" and that Perilya has entered into deeds of cancellation with the optionholders. 4 There are also 7,828,638 performance rights on issue. The scheme implementation agreement contemplates the accelerated vesting of the performance rights and the issue of shares in lieu to the performance rights holders, prior to the date on which the shares in Perilya will be acquired by Zhongjin. The evidence also is that Perilya has sought, and the Australian Securities Exchange has granted a waiver of the relevant listing rules to permit the accelerated vesting of the performance rights without the approval of Perilya shareholders. 5 At the first hearing date the Court has to be satisfied of a number of matters. The principles are well-known. In In Re Hills Motorway [2002] 43 ACSR 101 at [5], Barrett J observed: The task of the court, in deciding whether to make orders under s 411 convening a meeting of members, has been expressed in various ways. According to the formulation adopted by Santow J in Re NRMA Insurance Ltd (2000) 33 ACSR 523, the court must see, on the material placed before it, that the proposal fits within the statutory concept of arrangement or compromise, that there will be available to members all the main facts relevant to the exercise of their judgment, that ASIC has had a reasonable opportunity to examine the proposal and that the scheme is so conceived and presented as to that structure, purpose and effect that there is no apparent reason, so far as can be foreseen, why it should not, in due course, receive the court's approval if the necessary majority of members' votes is achieved. To substantially similar effect are the recent observations of Austin J in Re GIO Building Society Ltd and Australian Securities and Investments Commission (2001) 39 ACSR 77, French J in Re Foundation Healthcare Ltd (2002) 42 ACSR 252 and Parker J in Re Ranger Minerals Ltd; Ex parte Ranger Minerals Ltd (2002) 42 ACSR 582. 6 These issues have been addressed in helpful written submissions which have been filed. 7 I am satisfied that the proposal which is set out in the scheme satisfies the condition of being an arrangement. 8 I am satisfied that the Australian Securities and Investments Commission (ASIC) has been given sufficient notification of the hearing today. ASIC has provided a letter which is annexed to the affidavit of Mr Michael Jools which says that ASIC does not intend at this stage to appear to make submissions in opposition to the scheme at this first hearing. 9 I am also satisfied that the scheme booklet which Perilya proposes to send to its shareholders has been the subject of discussion between ASIC and the proponent of the scheme. I am also satisfied that, at least, on the face of it, the scheme booklet provides a reasonable explanation of the scheme and makes sufficient disclosure of the material facts and circumstances to permit the shareholders to make an informed decision as to whether to approve or reject the scheme. 10 The next matter on which I need to be satisfied is that there is nothing on the face of the materials which would preclude the scheme from being approved at the second hearing, if the scheme is approved at the meeting by the requisite majorities. 11 I am satisfied on the evidence before the Court at the moment that the scheme does not contain any elements which would preclude it from being approved, should the requisite majorities be obtained. 12 The evidence discloses that independent experts, Ernst & Young Transaction Advisory Services Limited, have had regard to the amount of the scheme consideration and have concluded that the scheme consideration is fair and reasonable. This issue should, therefore, not impede the approval of the scheme should the requisite majorities be obtained. 13 My attention has been drawn to certain aspects of the scheme implementation agreement. First, there is a provision for the payment of a break fee of $600,000. Mr Paul Arndt, chief executive officer and managing director of Perilya, has deposed to the fact that the break fee was the subject of an arms-length negotiation. It is also to be observed that the break fee is less than 1% of the equity value of Perilya which is the guideline referred to in the Takeovers Panel Guidance Note No 7 for assessing what might be a reasonable break fee. I am satisfied that the existence of the break fee provision will not be an impediment to the approval of the scheme, should the requisite majorities be obtained. 14 The exclusivity provisions are, in my view, within the range of what is reasonable. There is also a fiduciary carve-out provision to accommodate any competing offers which might be presented. 15 In the circumstances, there is no reason to believe, on the material that is before the Court at the moment, that the scheme would not receive approval of the Court if the requisite majorities are obtained. I will have a look at the minute of proposed orders. 16 As to the proposed orders, I notice that the minute of proposed orders seeks an advertisement in terms which is slightly different to the form which is proposed in the Corporations Rules 2001 (Cth). However, I am content to make orders that the advertisement of the second hearing date be made in terms of the annexure to the minute of proposed orders. I will order that the minute of proposed orders with the annexure be placed on the Court file, so that it can be inspected by any person who wishes to see the form of that notice. 17 Therefore, I will make orders in the terms of the minute of proposed orders, subject to the amendment to para 9. I will insert "in the form of Annexure A to the minute of proposed orders placed on the Court file" instead of "to these orders". I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. Associate: Dated: 6 November 2013